Report recommends improvements to RFS monitoring

The U.S. EPA Office of Inspector General has released a report recommending ways the agency should improve monitoring activities for the renewable fuel standard (RFS) program. According to the report, the audit was conducted in response to the generation of millions of dollars of fraudulent renewable identification numbers (RINs), and aimed to determine if EPA has assessed program risk and designed necessary controls in the RFS program.

According to the report, the EIA did not track submission of third-party engineering reviews or annual attest engagements because it does not have an electronic monitoring system for those reports. Until these materials are tracked, the Office of the Inspector General said the agency can’t be sure that program participants are complying with regulations. However the EPA recently implemented electronic reporting requirements for attest engagements and said it intends to do the same for engineering reviews by the end of the year.

The report also notes the investigation was unable to determine if there is overlap in parties completing the third-party engineering reviews and attest engagements. In addition, it specifies that regulations currently do not preclude the same third party from completing multiple requirements and other reporting responsibilities, allowing for potential overlap. This could result in a conflict of interest if the same third party reviews its own work.

The Office of Inspector General recommends that the EPA Office of Air and Radiation modify existing systems to track the submission of reporting requirements, and recommends requiring electrical submittal of all reporting requirements for the RFS, including third-party engineering reviews and attest engagements. It also suggests the EPA revise regulations to include specificity on independence requirements.

The EPA’s Office of Air and Radiation has agreed with the report’s recommendations and is addressing them. As of May 2013, the EPA began requiring attest engagement reports to be submitted electronically. Engineering reviews are expected to be collected electrically before the end of the year. In its response to the recommendations, the EPA also noted that the ability to track the electronic submissions be will a part of future EPA Moderated Transaction System development, targeted for completion during the third quarter of 2015. The EPA also noted it expects to make a policy decision concerning the third-part independence in the final rule for the quality assurance program.